ESAB Corporation (ESAB) Earnings Call Transcript & Summary

Please welcome Vice President, Investor Relations, Mark Barbalato.

Good morning. I'm Mark Barbalato, Vice President of Investor Relations, and welcome to ESAB's 2023 Investor Day. [Operator Instructions] Today's presentation is being webcast, and both the presentation and the video will be available for replay on our Investor Relations website. Before we get started, I'd like to remind everybody that certain statements you will hear in today's presentation are forward-looking and as such, are subject to the risks and uncertainties laid out in our SEC filings as well as the disclaimer on Slide 2. And with that, I'd like to introduce our President and CEO, Shyam Kambeyanda.

Thank you, Mark, and good morning, everyone. And welcome. Thank you for all of you for taking the morning to spend with us, and all certainly a welcome to all the ones that are joining us virtually. Seven years ago, prior to joining ESAB, I had an engaging conversation with our Chairman. And it was about what we thought was the potential of this business and how we were going to set the path to go out and achieve them. And what I can tell you from the very start, I was impressed by the business and the potential that it had. We had a 119-year history of innovation, we have an unmatched global portfolio and unmatched talent of global -- unmatched pool of global talent. We have the best brands and we solve some of the crucial problems for our customers. We are a part of your everyday lives, whether it be the buildings you work in, whether it be the bridges you cross to go meet your loved ones, or the food that gets on your table from a farm to the energy used in our everyday lives. We are crucial to everyday life for all of you. To make that a little more personal, I grew up in India, a son of an army officer, and my father was actually transferred every 3 years. And we use the Indian railways to make our way to the 4 corners of that country. And today, ESAB is a key supplier maintaining that network of railway tracks. We are shaping the world together. And we are excited about what the future holds and awaits for us. We have a full agenda for you. We have a set of presentations. And then for those of you that are here in person, we also have set up some booths where you can look at our new products and get a view of our workflow solutions to our customers. So I'd encourage all of you to spend the time if you haven't already, to go out and look at our booths and spend some time with our teams out there. So what I would assert to all of you is that the conversation I had 7 years ago with our Chairman is absolutely true, and our results reflect that change. But what is also true is something that he and I and all of our conversations with, which is we're just at the beginning. We're just getting started on our journey. I'm thrilled today that I'm going to be joined by 3 members of my team on the presentation stage, Olivier Biebuyck, Piyush Sheth and Kevin Johnson. Some of you may know that Olivier was actually the first outside hire I made into ESAB. He says has been here 6.5 years. My thoughts are it's actually closer to 7. He was a big part of our innovation journey and the transformation of our equipment portfolio on all of our product lines. He now is the President of our FABTECH business, and he's going to share with you what differentiates us and why we're excited about our next chapter. He'll be followed by Piyush Sheth who joined us 4 years ago and made an immediate impact in our gas control business, bringing operating rigor and discipline to our financials and sales excellence within that business. He will share with you the plans that we have to create an unmatched global gas control business. And finally, Kevin, who has more passion for cash and profits than anyone else I know. He also has an Irish sense of humor that's very beneficial on those days when things are tough. And for those of you that know him, he actually has lived in South Africa, Europe, Australia and now here and not too distant past, he actually ran ESAB's South African business and he's truly a partner in our compounded journey at ESAB. For those of you that are new to ESAB, let me take a few slides to get you calibrated on who we are and the muscle that we've built to step into the next phase of our journey. The first piece is that we're a phenomenal global business. And let me highlight that with what differentiates us from the rest that are out there. We have a phenomenal emerging market business. We are 4x the size of any of our local competitors in those particular markets. We are also a leader in Europe and we're gaining strength in North America. We win because of our best brands, our strong local teams, and we also have a network of dedicated partners and channel partners. We also have global scale that we can provide to our local customers. For the first time, I'm also sharing with you our product line split. We look at our business in 2 dimensions. The first dimension is the geographic split that all of you see during our earnings call. But the second one is our product line split, and you can see it on the pie chart below. We have a filler metal and an automation and equipment business that we consider FABTECH and the rest that's remaining is our gas control business. We believe that the emerging markets are growing 2x times the developed market allowing ESAB to benefit from that particular trend. We often get asked the questions aren't emerging markets a drag on our profits. The answer is no, we actually make equivalent profit and profit percentages in the emerging market, which is a distinguishing factor and a source of strength for ESAB. Olivier and Piyush will share more details on this and share why and how we solve the most difficult problems for our customers and our expertise and our mission-critical products that we serve them with. Second, our focused commitment towards achieving the goals that we set. We like to keep things simple at ESAB and control the controllable. We use EBX on the issues that solve the problems that drive the biggest impact within our business, and we're data-driven. Our teams are transparent and accountable at all levels, and most importantly, we've built a culture of continuous improvement. Since we became an independent company, I am very proud of our team's execution against a set of goals that we've given to the outside world. In 2022 and 2023, we expect to beat the guidance that we started off at the start of the year. And you can see it on the chart, above guidance performance in 2023, and we expect to finish 2020 -- I mean, in 2022 and in 2023, we expect to do the same. In reality, I've talked about 2 years of performance, but we have been at it since 2017. So let's peel that onion back, and let me share more of that detail with you. And let me contrast to you what was in the business in 2016 and how far we have come today. I inherited a business with a ton of potential, but lacking sustainable process both in our financial and operating discipline, and that prevented us from achieving our full potential. We have changed that, and you'll see it on the next slide. In 2016, the sales growth in the business was negative 10%. Our EBITDA margins were 13%, and our working capital returns was 4.3%. Since then, we have engaged with EBX on every aspect of our business in our shop floor, in our sales aspects and commercial excellence and in the pace of innovation within the business. And we've improved the business since then. And you can see in 2023, we finished with 7% growth, 18% EBITDA margin. We had acquired companies with the cash that we had generated, 11 of them and improved our working capital returns by 1.2%. And here's the slide that actually showcases that for all of you. And what I would tell you is that our markets have not been favorable through that entire 7 years. In 2017 and 2018, we did have a small downturn in our end markets. We had inflation come at us at the end of that 2017 year and into 2018. And then obviously, everybody went through the pandemic in 2020. And you can see the performance of the business. In spite of these headwinds, we've delivered 6% compounded annual growth and improved our margins by 500 basis points. This is a credit to our team and the execution that we're capable of. And what you can see on the key takeaway here is the best compounders can deliver results year in and year out. And what you don't see on this chart is our cash flow performance. We have been great cash generators for these 7 years, and we expect to continue to do that, and Kevin will talk more about it. Peeling the onion back a little bit more. In 2016, when I joined, what I was told is that ESAB was fundamentally a filler metal business. We were a bit dated in our equipment portfolio. And as a result, most of our customers chose not to engage with us on the equipment portfolio, but that has changed. We have leapfrogged -- we have brought new equipment to the fore, and some of you will see it out in our booths. We have changed the discussion with our customers since then. We had suboptimal plants that were not efficient. We have changed that. You'll hear it from me, and then you'll hear it again from Olivier about the dimensions of change that happened within the business. And what I can tell you is we're in the middle innings on some of these aspects. We've got more to do and there's more juice to squeeze within ESAB. We've allocated a significant amount of capital towards M&A, and we have strengthened this team and the results are there for us to see. I love talking about EBX and so I know some of you have seen this slide, so indulge me 1 more time as I shared with all of you because the numbers are truly impressive. 317% improvement in new products. 40% reduction in our manufacturing sites, a 500 basis points improvement in margin and a 1.2x improvement in working capital. And we're just scratching the surface. More recently, we've used some data mining software to improve our purchase to pay and order to cash processes that has helped improve the service levels to our customers, but more importantly, take cost out of the business. Just like last quarter, we've engaged with an AI tool that will help us reshape our material planning and production processes to lower our inventory levels while improving our service levels. We also intend to engage on some commercial excellence activities with AI. The early things that I've seen gives me great encouragement about the potential of this initiative, more importantly, to continue to expand margins and grow the business. EBX is in our DNA and will help us to continue to raise the bar and deliver strong results. But that's not all. We have also shifted our business to get more focused on the positive secular trends that are coming at our business. I've heard many things out there, whether you call it us benefiting from an early cycle of a global growth, whether you call it reindustrialization, whether you call it reshoring or my favorite an industrial renaissance, it's all the same thing. We're seeing some secular trail winds all across the globe. In North America, you know the infrastructure plan that's underway, similar in Europe. Recently, I visited India and Saudi Arabia, and I'll share more details with you, but it's clear to me that there is something happening out there that's allowing for infrastructure investment, manufacturing investment in all of our geographies. Recently on a trip to Mexico, I found out that all the manufacturing and industrial ran around big cities in Mexico have been taken up. And people are planning to build factories to serve the North American market. And some of you may know this and some of you may not, but ESAB is actually on equal footing in Mexico with our peer group. We are well positioned to win in that particular market. What I would also say to you is that when I travel to India, and I obviously go there every year, I am seeing mark change in infrastructure. The country continues to move forward. Our business in India has a CAGR of double digits through the cycle. We have a public company in India, and some of you can see the valuation within that company, but also the growth rate that we're experiencing in India. I went to Saudi to experience the Vision 2020, and I can tell you it's real. What I found out is that they're building a year-round Winter Olympic Park that is going to be ready for the 2029 Asian winter games, they've started to build out the plan for that line project also on the Red Sea, including a very large holiday resort that's coming up on the Red Sea. Not to mention the fact that they're going to host the 2034 Soccer World Cup. If the plans come to fruition, Saudi Arabia will probably use 400% more steel than it's using today. Three years ago, we decided to invest in Saudi Arabia. Today, we have a functioning local team, and I'm very proud of the progress that we've made and what we're attracting is new business in that particular region. The other aspect within our business has been the need for productivity, quality and digital connectivity and analytics. And we have progressed on that particular front. You have seen some of it, and you will see some of it with our InduSuite product line that we're showcasing outside in the booth. We now have the best suite of software and analytic products for our space. What we've done has made it open architecture. What we've done is made it easy for our operators to use the machines that we have, and we give the best analytics. And you'll hear more from Olivier as to how this has changed the conversation with our customers and allowed us to take share from our competition and increase our wallet share. We're proud of what we've accomplished, but you should also know that we're very comfortable with change as a company. What I'd submit to all of you is that the only thing that allows a company to endure a 119-year history is its ability to change and adapt. And that's who ESAB is. We see our history in the last 7 years is relevant, but we know that we will need to change and adapt to build a brighter future. And this company is ready to take it up a notch and I'll be sharing more with you as part of ESAB 2.0. The new goals include $4 billion in sales, 22% EBITDA and the same target of 100% free cash flow conversion. So let me just sort of give you a little bit of color as to why I'm excited about this journey. What you see on the bottom is us going from $1.7 billion to $2.6 billion in the last 7 years. We did that with an incomplete product line. By that, I mean, we were fundamentally a filler metal company with a dated equipment line and a suboptimal gas control business that was focused on industrial. Today, we're completely different. We have a proprietary line and a full line of filler metals, a complete line of equipment and automation solutions and a leading business in gas control. In addition to that, we are a great generator of cash. We expect to generate over $2 billion over the next 4 years and as a result, continue to make the acquisitions needed to be a compounder. So I would submit the stretch was from 2017 to 2023. We strongly believe the goals that I've set for you today for 2028 is absolutely achievable when you look at what this team has accomplished and what we have left to do within the business, to get us up to this level. The goals on margin, we believe, are well within the control of this management team, driving a change towards mix continuing to build our commercial promise to sell equipment and using our cash flow for acquisitions. And then the last is continuing to drive cost out of the business through EBX, the AI tools that I mentioned to you. So we're very confident about achieving our 2028 goals. Peeling the onion back a little bit more and giving you a view of the product lines that I've shared with you for the first time. And Olivier will add to this in his presentation, talking about our proprietary formulations and our manufacturing excellence in the filler metal space. We also have a very strong engineering team investigating new ways to create environmentally friendly formulations in filler metal. This is a great product line generating a tremendous amount of cash for ESAB. We have the best global brands and we work towards specifications with our customers to drive unique solutions and stickiness. We see this business grow from $1.6 billion to $2 billion. We see further improvements in geographic expansion for these filler metals and also chances to continue to improve our manufacturing efficiency. This business, we expect will grow at low single digits with a gross margin of 35-plus percent. And we think that AI can help us accelerate the innovation in our formulations for this particular business. Moving to our product line that we believe has the best potential for growth within our portfolio. It's our equipment and automation business. And you can see we've spent a lot of time in 2016 to 2023, setting up this business for growth. And I'm very proud of Olivier and the team and the work that they've done to completely revamp this portfolio and what they've accomplished in a short period of time. What I told you before, we were considered a filler metal company. But today, we have a portfolio that we can provide a full workflow solution to our customers. We can provide the equipment, the automation solutions, the robotic torches and the filler metal needed. The best validation for this came to us at the Essen show. And for those of you that are not familiar with this, we have 2 industry events that are quite popular. The first is FABTECH, that is an annual event and then the Essen show in Europe, which occurs every 4 years. And because of COVID, we actually did not have an Essen show in 2020. As a result, there was actually a longer gap for us to showcase our equipment. And that show was eye opening. It was extraordinarily well attended. We had customers from Asia, South America, the continent of Africa and Europe present. And I would actually submit some customers of ours from Mexico and Canada were also there. And it was eye-opening to all of them to the transformation that we had made in our equipment business. We have completely revamped our light industrial line and we had introduced our newly created heavy industrial line. And some of you have seen this outside or will see it outside in our booths. For the first time, Kevin and I were thrilled that we took orders that more than made up for the cost of the show. So that was the validation that we were looking for, the excitement that we're looking to generate and it's there. We have also focused on training our sales team to sell the new mix, and I'm happy with the progress that we've made in terms of changes in our incentive plans and organizational realignment to ensure we have the focus that we need. This product line is expected to grow mid- to high single digits. The gross margins in this product line are already better than fleet average at 40% -- we were able to serve in 2016. Talking about gas equipment. Just to calibrate all of us. The reason we're in this business is because welding and cutting needs an inert environment. And that inert environment is usually provided through an inert gas. And controlling that inert gas made a lot of sense for what we have been doing for 119 years. Hence, it was a natural extension for us to be in the business. Since then, we acquired a company called GCE back in 2018 and increased our servable market by adding specialty gas and medical gas to our portfolio. And what we found is a business that's less cyclical and has a better margin profile than our base business. In addition, medical and specialty gas is in a very highly fragmented section, allowing us to grow because we have scale, but also acquire companies and roll up the space, and we're excited about what can be accomplished there. And Piyush will be sharing the mission-critical nature of this business and how we win in later slides. The gas control business is expected to grow mid-single digits, today has a gross margin of 40-plus percent. We expect to improve it even further. And we expect to do a lot more acquisitions in this space to create an unrivaled global player. When it comes to acquisition, we're confident because of the muscle that we've built. Since 2017, we've actually done 11 of them. And all of them have moved our strategic priorities forward. What I've listed here are the 8 acquisitions we did prior to the spin. We have 2 frameworks to evaluate acquisition, a strategic criteria and a financial framework. And what you can see here is all of these acquisitions moved our strategy forward, 70% of the acquisitions allowed us to create a better workflow solution set for automation and robotics at the same time, allowing us to improve our digital capabilities. The second set of priorities that we had as we evaluated this business was the financial framework, where we want to acquire business with strong secular tailwinds, mid-single-digit growth profile better than our base business, have gross margins north of 40%. And our expectation is that we deliver greater than 10% ROI within 3 to 5 years. Now I know a lot of you have asked me that question is did we have an ROI target. So it was important for us to share that with you today. And it's important for us that we look at both criterias as we make acquisitions. These are the acquisitions that we made post spin and becoming an independent company. And what I would submit it's the same things that we've done before, bolt-on tuck-in acquisitions that change the mix of the business, improve our servable market and improve the growth and margin profile of the business as well as moving our strategic direction forward. Swift-Cut was into an automation space in cutting Ohio and Therapy were on the medical side of gas control. And you can see the growth rates of the business. We were at 6% in the base business. These acquisitions grew 9-plus percentage, and the margins were greater than 40%. And let me also share some other details that we've not talked about. Most of the businesses that we've acquired, we've paid a multiple somewhere between 9 to 11. And these businesses have met their hurdle rates within the time frame that I mentioned. In fact, some of them actually met it earlier. GCE being an example, [ EVOC ] and Exaton being the other examples, where they met our hurdle rates much earlier than expected. What I can tell you is that Ohio Therapy and Swift-Cut are off to a great start, and we're confident that we will be able to achieve the ROIC hurdles in the expected time frames. We're also very happy about the funnel we've created. Vusa is here, and I'm sure some of you can have a chance to talk with him. We've created a funnel of over $7 billion of current prospects for acquisition. Within that, we have validated and qualified $3 billion of targets and are actively cultivating them. Out of that $3 billion, we believe $700 million are actionable targets for us over the next couple of years. And as I mentioned to you, we expect to generate about $2 billion in cash. And so as a result, this is truly something that we can accomplish in that time frame. But more importantly, I expect these numbers to continue to grow for us to develop more prospects, qualify more prospects and have more actionable targets for us to execute on. As a result of the innovation, the new products that we've introduced, we now have fundamentally changed the available market that we serve. In 2016, we were serving a $15 billion market. In 2023, we increased that to $30 billion. And today, we've moved that number for 2028 closer to $40 billion, giving us ample room for growth, margin expansion and stronger cash flow. None of this is possible without a strong team. Most of my executive team is here and all of you will get a chance to interact with them over lunch. We collectively are committed to building something special together with the rest of our ESAB teammates and fulfilling our vision of shaping the world we imagine. This team is helping me strengthen our culture, defined by our values of shared success, helping each other win, always improving purposeful leadership and every voice counts. ESAB also has been working for the last 100 years in shaping a better world. We have set ESG goals within the business that reduce our energy intake, reduce our water usage and waste to landfill. We are 1 of the best-performing industrials in terms of safety metrics and we expect to get even better. We believe in every voice counts being a global business, diversity is a source of strength for ESAB. Our engineering teams are working with steel companies and universities to figure out new ways to build environmentally friendly filler metal and make our products use more recyclable material. And last but not least, we're active in our communities. We're helping those in need and continuing to improve the quality of life everywhere that we are present. We're committed to building a better world. So now to my favorite slide, and let me emphasize that we are reiterating the goals that we set on the Investor Day we did 18 months ago. We believe that we can achieve the targets that we set for ourselves at $3 billion, 20% EBITDA and a 100% cash flow by 2026. But because of the EBX muscle that we've built and the confidence based on the results that we've achieved to date, the new product portfolio, the automation focus and our leading gas control product line, we're comfortable raising the bar for our goals for 2028. And what you see here are exactly that. $4 billion in sales, 22% in EBITDA, and 100% free cash flow while maintaining a strong balance sheet. Olivier, Piyush and Kevin will share more details. Thank you again for your time, and please turn your attention to the screen for a video on FABTECH. [Presentation]

Please welcome, President of Fabrication Technology, Olivier Biebuyck.

Good morning. I'm excited to be here today with you to talk about what we have achieved in what -- called ESAB 1.0 and where we are going to take the FABTECH business to the next level in what we call ESAB 2.0. But first, let me give you a few numbers about FABTECH. FABTECH was founded in 1904, with breakthrough invention of the welding electrodes. Our ESAB brand has been around, as Shyam mentioned, for almost 120 years. Our story is a long story of successful technological innovation and global expansion. Today, FABTECH is in 150 countries, generates $2.2 billion in revenues, at 35% gross margin. We serve multiple growing end markets. 73% is filler metals where we have a global leadership and 27% is automation and equipment, which is a key part of our growth strategy going forward, and I will talk to you more in details in the coming slides about it. So Shyam has talked to you about ESAB 1.0 and ESAB 2.0. I'm going to do the same for FABTECH and walk you through our journey. So in 2016, FABTECH was an untapped filler metal business coming out of a tough year with revenues declining. Gross margin had been flat and stuck at around 33% for a while and there had been no acquisitions since 2014. Capital turns were low due to slow-turning SKUs. And so in ESAB 1.0 as Shyam has shown to you, we achieved to grow every year, except in 2020 during COVID and to get to a middle single-digit CAGR, mainly organically. We also built some muscles around acquisitions. We acquired and successfully integrated 8 companies since 2016. And more importantly, we embarked on a complete modernization of our offering and subsequent cleanup of our SKUs, driving our working capital returns up with improved financial controls. So don't get me wrong. I did not say that FABTECH was a bad business in 2016. In fact, it was in a good industry, good markets, with local leadership positions, but it lacked management processes and focus. It lacked focus on differentiation and margins. It lacked pricing discipline, it lacks economies of skills in innovation and it lacked economies of scale in manufacturing. What we did over the last few years is to develop and implement several key processes and capabilities as part of what we call our EBX playbooks. We also started to reinvest in our innovation, and we did it without breaking the bank. By the way, in case you were wondering, with Shyam and Kevin watching the bank, it would have been impossible for me to break it anyway. So what we had to do is to find a way to do more, better, faster without breaking the bank and I'm very proud of how our R&D teams around the world have stepped up to the task and they agreed to reinvent themselves as we reinvented our products. So part of our innovation secret sauce, and I'm not going to give you the secret sauce so just a part of it. Part of our secret sauce are the capabilities that we have developed successfully over the last few years. It's anchored into voice of customers, rapid prototyping, economies of scale of skills through our global collaboration and open innovation with external strategic partners like what we have done recently with the world. We also started to reposition our automation offering towards welding processes and workflow solutions, leveraging capabilities and offering in digital to provide our large customers with unique insights on what's happening on their shop floor. So Shyam already shared with you the key ingredients of our EBX culture. If you ask me, at the heart of it, it is about a managerial culture of continuous improvement and the challenge of the status quo. It's a unifying cry for action, and it's very powerful. If you look at our manufacturing footprint, for instance, we dramatically transformed it over the last few years to gain scale. In 2016, the average revenue per plan at FABTECH when we had 39 plants was roughly $40 million per plant. Today, it's more than $100 million per plant, which obviously enables us to do things that we were not able to do before. So during ESAB 1.0, we developed and implemented EBX playbooks, playbooks on pricing, playbooks on positioning and differentiation, playbooks on rapid innovation on SKU and portfolio management, on manufacturing optimization, on sourcing and purchasing, on talent, and I can go on and go on and go on. So these processes that we put in place have delivered strong results, and they will help us to accelerate our trajectory going forward. So talking about acceleration in our trajectory. Let's talk now about where we go from here. And let's talk about the foundations we have laid out during ESAB 1.0 and push it to the next level. We want to expand our leadership in filler metal. We want to gain share in equipment, where we have completely revamped our portfolio. We want to capture the second wave of automation and robotics, and we want to continue to improve our margins through manufacturing and commercial excellence. We expect it to bring us around $3 billion in revenue by 2028 with a larger share of equipment in automation where we see faster growth, thanks to market tailwind combined with stronger -- with market share gain opportunities. But we are also targeting to continue to improve our margins by 300 basis points to 38%. So in the previous slide, I talked about continuing to expand and strengthen our filler metal leadership and margins. Our filler metal business is strong and differentiated. We have a global leadership with strong local presence. And now, as I mentioned to you, we have scale. We have a lot of patents and proprietary formulations and state-of-the-art R&D centers. Most of our products, in fact, go into mission-critical applications, and they represent a small cost of the total cost of our customer projects. They are either specified into the applications or they are optimized for it. Don't get me wrong. Switching is feasible, but it's most of the time not worth the risk reward. So you don't always notice our filler metals. As I said, it's a larger component of our customer projects, but I can assure you that you will find our filler metal in the most exciting places everywhere in the world. So let me give you a few examples. Let's talk about New York, which I think we all agree is 1 of the most exciting places in the world. So let me drop a few names. You will find us in One World Trade Center. You will find us in one Vanderbilt. You will find us at The Spiral of Hudson Yard, just to name a few iconic building. And I'm sure that many of you know, 270 Park Avenue, and you will find us there, too. So well, we are very proud that our filler metals and proprietary formulations have been the one selected to weld the structure of the building. Our formulations have been selected because this customer, which I will not name, had very demanding expectations, and I'm sure they want their new headquarters to stand tall for the next 100 years. By the way, we are also grateful to them that our team has been invited to the topping ceremony that took place a few weeks ago here in close by. So start spreading the word. If filler metal can get -- can make it there, they can make it anywhere. So let's talk now about automation and equipment. During ESAB 1.0 -- weekly revamped our offerings. Now what does it mean? We have 14 -- product families, which cover the whole range of -- releasing new heavy industrial products for large end users, which are all digitally enabled to provide superior insights on productivity and bottlenecks to these demanding customers. Cobot offering. I could have said we have the best, but let's say, we have a best -- best-in-class Cobot offering and the industry first autonomous adaptive welding system for large fabrication projects, which, by the way, we have a demonstration in the exhibition, which I hope that you will have the time to go check [indiscernible] of what our NPI allows us to do. Let me talk briefly about our partnership with Linde in North America. They were looking for some differentiated offerings, and we are quite impressed with our new lineup and interested by our new Renegade VOLTs that we developed in partnership with DEWALT. So we agreed to give them exclusivity on our first manufacturing shipments and to collaborate with them on marketing efforts, including on their website. This collaboration expands our traditional filler metal relationship and allow us to increase the mix of equipment that we sell to them and grow our business strong double digit. In automation, to talk about automation, our focus is on offering distinctive welding processes, which tend to be the most differentiated, less CapEx-intensive part of our large automation projects. We combine this with our software solution and consumables to deploy integrated workflow solution at our customers and help them boost their productivity on their very tight quality control requirements. What we don't do a lot is the material handling system because we believe that there are a lot of local independent integrators out there that can do a great job at the material handling and they prefer to have a good partner like us. The team does with them as opposed to compete against them. So let me now give you a few concrete examples of what I mean by deploying workflow solutions at our automation offerings. So here is an example of 1 of our large customer in structural platforms. This type of customers will comply with very strict requirements and quality certifications. In this case, but it is, in fact, really not -- it's far from unique, most of their documentation was still paper-based. In fact, you can see on the picture that we took, they even had welding instructions on the beams to be welded. We help them review their core welding processes and workflows. We deployed our digitally enabled warhead machines, our standard automation welding tractors and our well-known software tools to digitize their quality tracking and remove multiple fabrication bottlenecks while improving or increasing their productivity. In fact, we saved them multimillion a year. I can assure you that this cemented, in fact, I should have said welded our relationship with them and the value that our know-how brings to their business. So let me give you another example. This is a global leader in wind tower fabrication. For them, we combined all our capabilities. Our consumables, our global supply chain, our multiple technical local presence and our distinctive welding processes for automation to help them transition to the new demands of offshore winds. We signed a partnership to roll out our solutions at none of their plants across the world. They are, frankly -- that's why I don't name them. They are 1 of the most demanding customers we have, but they know they can count on us and our technologies anywhere in the world. So today, FABTECH coming out of ESAB 1.0 is a vibrant 120 years global business with proven performance that will serve as a catalyst for acceleration during ESAB 2.0. As mentioned -- Shyam has mentioned, we already did quite of work. If you think about where we were when we started at $1.6 billion. And when you think that we had to do that without the playbooks and without the muscles that we had to build as we were delivering the results. Going forward, we are targeting to bring our revenues up organically and inorganically to $3 billion and further improve our margins to 38%. The margin expansion combined with our revenue growth and capital returns, create a positive cash generation flywheel, which enables us to compound our results to fuel our future. And so thank you very much for your attention and talking about fueling our future. We'll get to see a quick video on gas equipment. Thank you. [Presentation]

Please welcome Vice President and General Manager of Gas Control, Piyush Sheth.

Thank you, Olivier for taking us through the world-class FABTECH business. I joined this business about 4 years back, teamed up with Shyam and his talented team to build this platform. It's for the first time that we are sharing the details about the gas equipment platform, and I'm thrilled to be here with all of you to share the insights and journey of this business, which is a lesser-known but equally exciting business. As Shyam mentioned, 1 of the first questions I had when I joined this was what is the connection between Gas control and FABTECH business. Very quickly, I learned that gas is a very critical input to the FABTECH processes. And hence, it is a very close adjacency to this business. Gas Control. What we are doing as a part of this business is to take this technology into more mission critical and more regulated markets of medical and specialty gases. Gas control equipment of ESAB is built over last decade with acquisitions of Victor and GCE. Both of these are very leading brands. These brands have been standing tall for more than 100 years. Yes, 100 years plus. Some of the brands like Victor Technologies is almost synonymous to what Coke is to soda. Today, this is $450 million business with impressive 43% gross margins, spanned over 130 countries. And thanks to associate 1,600 great associates who help us run this business. On the bottom left-hand side chart, you would see that over the last years, we have built an unmatched portfolio that allowed us to expand the traditional industrial markets into high growth, less cyclical specialty and industrial gas markets. On the right-hand side bottom, you can see we also have a very nice geographic split of the business. Coupled with this unmatched portfolio and the nice geographic network that ESAB brings to the table, we have a unique position to grow in this very fragmented business. Let me take a moment to share with all of you why gas control is mission-critical for our customers. In most of the end markets that we serve like health care, hospitals or industries or the research labs, gas is supplied through a very high-pressure source. This high-pressure source of gas is then carefully managed for the flow and the pressure to safely transport and distribute through the infrastructure. And more importantly, before it is used for the end use. These gases are often toxic and flammable gases. Combined with high pressures, it makes the environment highly critical and risky. Most of our customers want to make sure that there are no untoward incidents happening because of either leakages or the flammability of the gases. The customers who are using high-value equipments like 3D printing machines, eye lasers, or medical care equipment in hospitals wants to make sure that there is no downtime because of the malfunctioning of the gas control system. As I mentioned earlier, we are into regulated and compliant industries. Gas control equipment also needs to be highly regulated and compliant. And our customers want to make sure that there are no penalties involved or no business risk involved because of noncompliances. All these things put together makes our gas control equipment a mission-critical business for our customers. You may imagine these facilities are built for years to last. There are modifications, there are add-ons, which happens continuously in these businesses. And this is what makes this business very sticky and hence, very interesting for us. With that background, let me jump into our foundational and transformation period of what we call ESAB 1.0. I'm going to talk about gas control equipment transformation. In 2016, this was a business which was shrinking, there was really no major investments in terms of M&A and the working capital turns were really, really low. However, the gross margins were solid, you can see 41%. So fundamentally, this was an impressive, very interesting business, but it lacked the strategy and the focus. Between 2017 to 2023, we really expanded and improved this business into a high-growth business, expanded the profits by 300 basis points. We did 3 strategic acquisitions during this period and improved our working capital to 4.6 turns. I'm sure Kevin is still not happy and he should not be. We will focus more on that. This clearly was a business with a meaningful upside potential, which we realized. Let me go into some details of how we realize this. During this period, between 2016 -- between 2017 to '23, we literally more than doubled this business from around $200 million to $450 million business. One of the fundamental reasons we were able to do that was the decision that Shyam and team took to create a dedicated management team to drive this business. This management team focused on clarifying the strategy and execution plan for this business. As this team was looking into the details, it was very clear that we really need to globalize this business. Our business was highly niche in only a few regions. We wanted to globalize this business. With ESAB's global network and footprint, we globalize this business, took it to the regions like Middle East, Latin America, Pacific and also leverage GCE's presence in Europe. Second thing was to increase our served available market. Really, the industrial markets are 1 of the slower growing markets, and we were really playing in a very narrow space. We wanted to expand our market -- served market by going into less cyclical high-growth medical and specialty gas markets. This is what we did by accelerated NPI. The acquisition of GCE also brought the portfolio in these areas, which we were able to use to expand the third market. Overall, as Olivier mentioned, we also deployed a lot of EBX tools to drive the profitability improvement, productivity and efficiencies into the business. We completed 3 strategic acquisitions, as I mentioned, these acquisitions not only helped us to transform this business, but actually created a very good foundation for the future. Before I go into the future, let me take a moment to highlight the role of EBX into this transformation journey. We extended EBX even to our acquired companies. As you can see on the bottom right-hand side charts, we exponentially increase our new product introductions using the playbooks and the reduced cycle time on R&D. Our manufacturing footprint, as we were acquiring the companies was actually increasing. We were able to optimize this footprint without impacting any of our operations thanks to the great playbooks we have. As I mentioned, with the pricing discipline, the productivity initiatives, we were able to expand our gross margins by 200 basis points and take it to impressive 43%. We even improved our working capital returns by really simplifying our business, optimizing our product lines and increased focus on inventory management and other supplier and customer terms. Overall, EBX played a very important role in this transformation journey, but more importantly, it created the culture of continuous improvement. Let me now take you all into the exciting part of ESAB 2.0. Our goal in ESAB 2.0 is to build a $1 billion gas control platform by creating an unrivaled scale and by taking a leadership position into spec gas and medical markets like we have in industrial space. What we need to do, as you can see from 2016 to 2023, we more than doubled our business, we need to do exactly the same in the next 5 years. In fact, we have done a lot of heavy lifting already of creating the products, NPIs and geographic expansions. We are just scratching the surface in ESAB 1.0, and we really need to accelerate those initiatives to gain more share and faster share gain. We need to globalize along with our customers. We need to globalize the regional acquisitions that we're making, and we need to further invest in our NPI to drive the faster share gain in the regions of interest. Apart from that, we need to continue to build our portfolio to effectively serve the medical and spec gas areas. With the acquisitions we recently did the Ohio Medical and Therapy. It really provides us a muscle to grow much faster into these markets and gain share. It's about $150 million of organic share gain that we want to do. We are also going to bring EBX muscle to our commercial excellence, as we want to build a value-driven sales team so that it can leverage our differentiated portfolio, we want to make sure that we are building these teams. Apart from organic share gain, I am very confident that with the 3 billion pipeline that we have created for M&A, which I am personally involved working together with our M&A team that we will drive this $400 million of acquisitions. This will be in the areas of medical and specialty gas, but not only limited, we will also look for strategic acquisitions in industrial space. Overall, I am confident of building a $1 billion platform with 45% gross margin during this 2.0. Let me take you through a few examples, which surely increases my confidence about our strategy and validates our strategy, but I sincerely hope it also gives you an insight and also increases your confidence into our strategy. The first example is a large industrial facility in Middle East. This is an equipment manufacturer for oil and gas and energy equipment, wind energy equipment. This customer was facing serious headwinds from the inflation. Operating costs were rising, and they really came to us for help. To give you a scale, this facility uses about $5 million worth of gas, which is distributed over 300 welding stations. And interestingly, they had no idea about the value chain of this gas and how it was used across these stations. We piloted our newly created connected sensor network along with the cloud solution and with the very reliable and accurate gas equipment that we have we were able to provide a very good visibility into use of gas, which helped our customers to know exactly which stations are efficient, which are inefficient, how to optimize this. I'm very happy to share that the pilot that we did actually found the savings of gas of more than 25% when implemented, you can see that creates more than $1 million savings a year. Not just the savings, it also creates a lot of other operational benefit, which reduces the total cost of ownership for our customers. So the combination of digital offerings that we have, the unmatched portfolio of equipment that we have. And at the same time, the domain expertise that we bring as GCE, but also along with FABTECH, which is unique. Nobody else can bring that. we create real value for our customers and reduce the total cost of ownership. Please spend some time at the demo areas to witness this. The next one is very interesting. It's closer to all of us in the United States. You may know Arthur Blank, who is the founder of Home Depot. His foundation is building 1 of the largest pediatric hospitals in the United States. This hospital is going to be built over 2 million square feet. It has an annual capacity of 400,000 patients and the beds are almost 500 beds. Their goal is to provide highest patient safety and a very good patient experience. I'm very happy to share that our recently acquired Ohio Medical actually was proudly won this prestigious project with the patented push to set technology and the digital offerings. Suction and oxygen therapy is always critical. When it comes to pediatric hospital, it's even more critical. And hence, there are respiratory therapies and clinicians who get involved in selecting the highest safety equipment which they want to make sure is reliable and error free and easy to use because they don't want the nurses to make any manual errors. Ohio Medical exactly provided that, and we won this project. Not only that this is a very interesting win, it opens up the doors for us to provide a much wider portfolio that we now have for these medical facilities. The last one is creating -- is a pharmaceutical lab, 1 of the leading pharma companies in Europe is building a state-of-the-art research lab. This research lab is being built for 1,800 researchers, yes 1,800 researchers built over 160,000 square feet. They want to make sure that this facility is highly safe, reliable and state-of-the-art. The space is also constrained for them. They wanted to make sure that equipment they use is compact. What makes this facility highly complex is they have 132 different gases that needs to be managed as I mentioned, a lot of them toxic and flammable. With our equipment through a pure range of high purity equipment, we were able to provide them with a very reliable, accurate, precise equipment, which actually help them to make sure that their operational risks are minimized and the reputational risks are not there for any nonperformance or any incidences. So that's a very interesting win. And by the way, we also had a compact equipment, which helped them save about 10% to 15% of the space. All these examples definitely builds my confidence. With that, let me highlight and summarize that, today, we are a $450 million business. Our goal is to build a $1 billion platform for ESAB. We will do this by driving mid-single-digit organic growth, expanding 200% basis point margin and further improving our working capital returns. We have enough pipeline of projects and plans to drive this organic improvements. At the same time, I must tell you that I am highly confident about $400 million acquisitions working together with our M&A team. We have this $3 billion pipeline, which I'm confident we can convert. We are a very good home for small and medium organizations, medium players in this fragmented industry. With that, I'm really confident of building this billion dollar business at 45% gross margin. That, thank you for your time today, and I would like to invite Kevin Johnson to the stage.

Okay. So good morning, everyone. It's great to be here today with you all. I think the first thing you'll notice I don't have a sizzle video. I think I have to speak to Shyam for next time because I feel somewhat left out here. So I've been the CFO at ESAB now for about 5 years. And there's not a gray hair insight or maybe there is. But it's been -- it's really been great to be here today to hear our team talk through the progress that we've been able to make in ESAB 1.0. For me personally, this investor time, there is -- really is a time to reflect on where we started and the progress that we have made in reshaping our business. But also, I think the most important thing is where we're going now into the future. So that brings me to our financial flywheel and my part in this tremendous journey. So today, firstly, what I'm going to talk about is our business system, EBX, you've heard a lot about that today. I'm going to talk a little bit more and we've been using that to improve our margins and also our cash flow. Secondly, it's all about accelerating innovation and driving growth and making sure we get market share gains. And thirdly, with the disciplined capital allocation that you've seen and the strong free cash flow that we have been able to demonstrate, this is really align our business to delever, execute on our M&A and continuing to invest into our business. So over the next couple of slides, I'm going to go into this in a bit more detail. So we have set ourselves, as you can see on the slide, a $4 billion-plus revenue target for [ 2028 ]. And what gives us confidence in our ability to get there. Firstly, as you heard Shyam talk about earlier, our business is experiencing some really powerful tailwinds at the moment. It really is a unique time for ESAB on for our industry. We're seeing welder labor shortage in developed markets such as Europe and North America, increasing regulatory and safety requirements, which you'll heard readout as Piyush went through his presentation. And this thing called reshoring, which is impacting markets for ESAB, like in Mexico and in India, where we have a leading position. And also, what I think you've heard from Olivier and Piyush today is that there's an increasing demand from our customers for improved productivity and lowering their costs. ESAB really is uniquely placed to take advantage of all of these powerful tailwinds. Firstly, ESAB has a local presence and global reach, unlike any of our peers. That means that we can offer our customers solutions tailormade in the geographies where we operate. Secondly, as Olivier often tells me my job is to protect our R&D investment and we will continue to do that to accelerate market share gains. And as Shyam talked about at the Essen and FABTECH shows you've seen the new Renegade VOLT, the first ever battery-powered welder in our market in partnership with DEWALT. And I'll be a little bit more forceful than what Olivier was saying, but we have the leading Cobot solution in the market. And what you're going to expect from ESAB as we go into the future is we will continue to make those investments in new products. We're also enhancing our commercial execution, no point having all of these great products and not have an ability to sell them. So we're putting a lot of focus. We've been doing it this year. We'll continue to do this in the future to make sure that we sell these products effectively in the market and key in market share. Finally, our compounding journey will continue with bolt-on acquisitions like the Ohio Therapy and Swift-Cut acquisitions that we've discussed today, funded by our strong free cash flow. So on margins, I'd like to pivot to discuss our business system, EBX. You've heard a lot about that today. But what I can truly tell you it's our culture, it's our DNA. It's what has helped reshape our business over the last several years. I've been using EBX myself for several years. I'm actually trained to train in 1 of our tools, RCCM root cause countermeasure just like many other employees of ESAB today. But I want to take you through a few examples of how we've been using EBX to improve our business. The first area is pricing. In 2016, as Shyam mentioned, we were not in a good place with pricing. And we've been able to use our EBX business system to improve our processes, speed up the time for us to go for price in the markets. In some of our markets today, we've got so good that we're able to go for price in less than a month. We also have made sure that our pricing is not just covering steel, if we go back to 2016, we were really only looking at steel and covering that with inflation. We've built our toolkit to expand it to cover all types of inflation and to make sure that we're staying ahead of that. But in ESAB 2.0, we're now pivoting to value pricing. We have an opportunity with all of this great innovative new product to actually get best prices in the market and not something that's going to help improve our margins in the future. We also have been working on a project called PLS. So ESAB has quite literally thousands of SKUs. And with our PLS project, what we've been focusing on is those SKUs that drive the highest growth and the highest margins. We've done some excellent work this year and rationalizing our SKU base. But what's exciting me for ESAB 2.0 is that we're now moving into our growth phase. So we're using and deploying PLS to actually grow our business. And thirdly, we are only in the middle innings of our rationalization of our manufacturing footprint. We have several projects lined up for the next few years that we're going to continue to work on. And quite obviously, if we take a factory out, as Olivier pointed out earlier, it improves our fixed costs and has a tailwind for us on our margins. I'm going to give you a few examples but summing up, we've got a rich funnel of EBX opportunities and projects that are going to improve our margins in the future. And this, coupled with margin accretive M&A. It's going to give us a lot of confidence today to deliver greater than 22% margins regardless of what happens on the top line. So moving to my favorite topic, cash, as I think Shyam mentioned and those of you that know me well and certainly those that work with me, you'll know that I love cash, as I'm sure many of you in the room do as well. In fact, interestingly, I never had any cash in my pockets, which my kids are always reminding me of, but that's a different story. In ESAB 1.0 improving working capital has really been a focus for me and my team. And we've made some excellent progress, and I hope you guys in the room here have noticed that happening. We've been automating our order to cash processes and delivering even higher cash flow. But our journey, it's not going to stop here. I had the opportunity this year, now that we're out of that terrible COVID thing to go traveling. And I went to [indiscernible] and I visited several of our sites around the world. I went actually to India this year, Mexico, U.S. and I was also in the Middle East. And what I can tell you is our teams around the world are engaged and they're driving this rich funnel of opportunities to improve our working capital metrics in the future. And when I come to site, they always talk about cash, which I love to hear. We're also exploring AI, as Shyam mentioned, to improve our working capital. We kicked off a project in our North American business this year around supply chain that was already starting to gain traction. We're looking forward to sharing more about this project in the future. We've got a clear path to working capital improvement. And that, coupled with the higher earnings that we're going to generate will allow ESAB to deliver greater than $2 billion of free cash flow by 2028, which will fund our compounding strategy. Finally, as you can see on the slide, we like to keep things pretty simple here at ESAB. You probably haven't seen a pie chart this simple before. We're going to use our $2 billion of free cash flow to fund bolt-on acquisitions and increase our dividend payments as our business grows. We're going to continue to invest in innovative products and maintain our leading innovator position in our industry. And finally, we plan to maintain a strong balance sheet with leverage around 2x, right in line with what we've discussed with you all in the past. Summing it all up. It's been a great journey so far in ESAB 1.0, but it's only started. In ESAB 2.0 as Shyam often likes to tell us our best is yet to come. So let me hand the stage back to Shyam.

Thanks, Kevin. All right. Note to self, always have cash in your pocket when you're with Kevin. All right. So as I finish up and get to my last slide. There's a couple of things that I hope you're taking away from this. First, we reiterated our goals that we will achieve in 2026, $3 billion, 20% EBITDA, 100% free cash flow. Because of the confidence that we have in our business, the muscle that we've built and our execution skills, we're raising our target for 2028 to $4 billion, 22% EBITDA, 100% cash flow and a target for ROIC on our acquisitions. We are shaping our business to be more focused on markets that have a secular trade. Those markets, in our view, are renewable energy, agriculture, infrastructure build and to some extent, defense as well. And ESAB is very well positioned to take advantage of that. We also have revamped our entire equipment portfolio, created solutions that are unique and mission-critical for automation and have a proprietary formulation base in our filler metal that gives us the fundamental advantage. The other thing that I hope you've taken away is there's no other company out there with the global footprint that we do and the global talent that we have to execute. The last piece that Kevin mentioned is that our plans include growth, yes, and we have strong plans for that, but we're very confident about the margin targets that we've set forth because all of those, we, as a management team, are in control. We believe we have more opportunities on gross margin expansion, and we have opportunities to reduce OpEx. The flywheel is turning on both of those and all of you know this, the more gross margin we have, the more we can invest in the business and on you go. My conversation with our Chairman always ends with we're just getting started. And that's how I want all of you to feel. The last point I want to make to all of you is that there has never been a better time to be an investor at ESAB. Our best is yet to come. Thank you for taking the time to be here with us this morning. We'll take some Q&A. [Operator Instructions] So thank you again for coming.

It looks like Mig has a question up here.

All right. I'll get us started. Mig Dobre from Baird. Good morning, and thank you so much for all the very helpful detail on the slides. I want to start with a question on FABTECH and I guess, multiple parts to the question. If I did the math right, it looks like where you are this year for sale -- every dollar of sales and equipment, you probably have something like $4, $4.5 in consumables. You've obviously invested a lot in the portfolio. And I'm kind of curious how you see that changing over time? Is there a specific ratio that you're targeting? Is it 2:1 or something that we need to be aware of? And then I have a follow-up on automation.

Yes. So I think the best way to look at those 2 businesses for ESAB -- that's actually a good way to look at it. And what you should take away from that metric is, today, our customers use ESAB filler metal but possibly have a different piece of equipment on the shop floor. And so 1 of the things that I've often talked about to all of you is that if we had the same share of filler metal in equipment, we would have a significantly larger business than what I've just shared with you on our 2028 goals. So the thoughts for us is that, that ratio, it depends, depends on which customer it is and what you're using. It's probably not the right way to look at that ratio in particular because some of our other peer groups have different measures on that particular front. But what you can assume is that, that ratio will keep getting better in terms of smaller, that we will be able to sell more equipment as we grow our filler metal business but I don't expect us to sell more filler metal just because we're selling more equipment just slightly more because we're gaining share.

And related to that, how do you get there? Do you need your distribution partners to be sort of the linchpin here in pushing equipment sales? Or is it direct sales and reaching out to large OEM customers, like what's the strategy here?

So a multitude of strategies on this particular front. The first piece, you're absolutely right. We actually built out our light industrial platform specifically to address the channel. For the longest time, we had a difficult time entering the channel because our lineup wasn't complete. And so one of the best examples that I have for all of you and some of you that have been part of our earnings call is that we started to convert some of the retail channel because of the full lineup that we had. And the recent innovation on the Renegade VOLT has allowed us to actually change that conversation even further. So there's a piece on the light industrial line, but today, we are dependent on the channel. And the channel is now excited because ESAB has a full lineup and a full portfolio. The second piece is absolutely the piece on end users and large capital customers. And Olivier had some great examples on that particular front. What we're finding today is that the conversation is changing. And let me add a little bit more color based on what Piyush said. You're talking about a customer, and this is, again, a North American customer in a different geographic region that was having an issue managing their gas. We had several price increases. There were some cost issues associated with it. Olivier travels into the region, connect the dots, calls up the gas control team, they show up we save them over $1 million on the shop floor. And I can tell you the other piece that he didn't mention that the shop floor had a different color of equipment on the shop floor. And today, it's yellow. And so our view is that this is not something that I believe is going to change overnight, but the change is occurring. We never had a current portfolio to go out and talk to our markets. Today, the conversation starts first with our digital solution and then followed right back up with our proprietary filler metal and the new equipment line that we have, creating significant value for them. So we think that this is going to be something that we continue to punch and jab out of the corner but we are seeing initial wins that give us confidence that we're headed in the right direction and more importantly, continue to change the mix, which then makes our business more profitable and obviously allows us to gain share and something that I've told our team all the time, if we continue to gain share, it shouldn't matter what the markets do, ESAB will continue to grow. And the other piece of this is every equipment that I sell today that is new is a share gain from somebody else. And so we love that aspect of our business. Our teams are excited. The Essen show was incredibly encouraging. And obviously, the early successes are also very encouraging for us. And 1 of the things that all of you will see out there is the adaptive welding scenario that we've created. This was a customer that actually had somebody else that they were working with. And because of what we showcased in Gothenburg on a visit sometimes people don't realize what ESAB has because we've been away from it for a while. And so the best reaction that we got in Gothenburg was, I had no idea you had made so much progress. I didn't realize that your analytical tools provided this much real-time data. And so today, that very customer is actually rolling out InduSuite across all of their manufacturing sites. And right behind that, I'm going to assume is going to come a whole bunch of yellow equipment that follows them right in the door. So really exciting stuff that I'm personally very excited about and the goals that we've set in our view, are very achievable. And as Kevin mentioned, the growth will be what it will be, but the margin expansion story is absolutely real and in our control.

Then last question on the Cobot what makes your offering different? You say it's leading. So what makes it different than your competitors? And is there a way to frame what the opportunity for Cobots is for the industry and for you as well?

Yes. Thanks, Mig, I know you and I have had this discussion before. So I'm not ready to sort of shape it out in terms of the size as of yet. But let me tell you why we believe we have a leading package. First, it's open architecture. Two, it's actually easy to use. And we're 1 of the few -- we are the only OEM out there that actually allows you to use a smart device to program and run your Cobot. The second is that we have a full solution, which means we get the equipment, the filler metal, the wire feeder, the robotic torch, and we're well connected in terms of our software to run that system. And so we've had a couple of initiatives out there where we brought customers in to look at the ease of use of our product versus another one. And ESAB usually wins out. And so we're excited about that portfolio. We think that the growth will continue. There are still things that we need to do in that space to allow people to get comfortable switching out a manual device with the Cobot, but the numbers are real. The paybacks are less than a year. I've given some of you some examples on this particular front where we went to a customer in Canada, and they were able to quadruple their output as a result of a Cobot where they were being inefficient because of labor shortages, et cetera, and they were able to execute on that front. But it still takes time for people to be convinced to get something that's a machine to do the work. But the inefficiency in our end markets or in our customer base will drive towards more Cobot. We had pegged this about 3 years ago as a $1 billion opportunity in terms of markets served, but I think it's significantly larger than that. But it will take a little bit of time to validate that number before we share it with all of you.

Thank you for the presentation. My name is [ Cha Wang ] from HSBC. And ESAB is a new name to me. I'm learning a lot from today's presentations. Just curious about sales enablement in terms of with end users in a lot of markets, they might have difficulty with financing. Just curious about whether you guys have a strategy for captive finance in-house financing?